The Triumph of Folk Keynesianism

Peterson wants a balanced budget and only grudgingly acknowledges the need for stimulus. Krugman wants the stimulus and only grudgingly acknowledges that there are limits: You can’t borrow forever. Nevertheless, the two men — representing opposite ends of the spectrum in this debate — agree on how we should proceed.

There’s just one problem: The plan they agree on is impossible. Well, let’s say close to impossible. Miracles do happen.

Step No. 1 of the Peterson-Krugman plan is working well enough. We’ve all done a great job of barely cutting spending, barely raising taxes, not reforming entitlements, and all told spending about a trillion dollars a year more than we bring in. Plenty of stimulus (though stimulus hawks like Krugman wanted more).

But is there a shred of evidence that the citizenry and our political leaders are ready for Step No. 2? That’s where everyone agrees to enough spending cuts and tax increases to close the budget gap. I’ll believe that when I see it.

Just for the record I suspect that what Lord Keynes actually proposed for dealing with cyclic downturns would work if a) we made him world dictator and b) he directed the operation personally. Paul Krugman is not John Maynard Keynes and we’re not going to make him world dictator.

And even Keynes wouldn’t recognize what has happened to his ideas today. While Keynes was mathematically talented, he was not like today’s economists who often seem to get lost in the math.

I’m not even convinced that the problems we had in 1930 are similar to the problems we have now. Health care was not like it is now. Is health care spending acting as drag on robust economic growth? We didn’t have the debt load we did prior to 2007 either. And government wasn’t the size it is now either.

“I’m not even convinced that the problems we had in 1930 are similar to the problems we have now. Health care was not like it is now. Is health care spending acting as drag on robust economic growth? We didn’t have the debt load we did prior to 2007 either. And government wasn’t the size it is now either.”

Pandora’s Box, my friend. And to continue with the allutions, ObamaCare may the straw that breaks the camel’s back.